Over the last few years, China has become an attractive destination for small, medium, and even large companies to source various products. In 2023, over 35% of the global manufacturing output came from China alone. Sourcing from China can be an excellent way to boost profits, reduce labor costs, and ensure an uninterrupted supply of high-quality goods throughout the year.
As a business owner or as a purchasing manager, your primary goal is to find a source of high-quality products at the best possible price. This can lower your product cost and make your business more competitive. While sourcing any products from an overseas country, it is essential to evaluate the various challenges and risks involved. Of course, there are many benefits of buying your items from China, but unless you have a proper strategy in place, you may not succeed in your effort.
China is a manufacturing superpower and produces goods for several industries across the world. However, sourcing the right products is extremely important if you want your business to benefit. Market research is essential to ensure that there is indeed a demand for the products that you want to source from China.
A common mistake when direct sourcing from China is finding complex products. For example, if you wish to import jewelry made from precious metals, maintaining the same level of quality could be a challenge. Choosing to import products that are labor-intensive means that you end up paying high labor costs and it is very difficult to control the quality. If that’s the case, getting products at an affordable rate and consistent quality could be difficult, which beats the purpose of sourcing.
One of the biggest risks of global sourcing from China is choosing unreliable suppliers. If you want to import custom products, choosing the wrong manufacturer could prove to be a costly mistake.
If you want to source products on your own, how do you start? On the internet, of course. However, cybercrime is on the rise, if you do not come across someone posing as a Chinese manufacturer, chances are you may come across someone exaggerating their business capabilities.
To avoid being scammed, you must ensure that you do due diligence on your potential Chinese suppliers. You may read online reviews from their previous customers and check whether there were any issues with the business.
Check the business license of your supplier, which will give you the following details:
- The company’s name and address
- Legal representative
- Registered capital
- Official company information.
Before you select any Chinese manufacturer, you must run a factory audit in China. You may either do this yourself by visiting China or through a trustworthy third-party auditor. Doing it personally has the advantage that you can develop a personal rapport with the management of the company, which matters a lot, particularly while doing business with any Chinese company for developing long-term business relationships.
Your checklist must include:
- The expected quality standards.
- Standard operational procedures on production lines.
- The production capacity according to your current and future needs.
- Technology capabilities.
- Overall quality management system.
It is important to inspect the manufacturing facilities to understand the internal quality control procedures. However, if you cannot inspect the factory physically, how do you evaluate their quality controls? You may have found a great manufacturer, but what if their quality control measures do not meet your requirements? If their production capabilities do not match your order, you may end up getting lower quality than the samples you initially received.
Bargaining is quite the norm in China, and no Chinese manufacturer expects you to agree to the first price they quote. However, bargaining should be a win-win situation for both you and the manufacturer. If you bargain too hard, some manufacturers may not even be interested in working with you. If your offer is barely profitable, you cannot expect to work with good-quality suppliers. After all, the Chinese manufacturer is running a business like you.
Say you negotiated very hard and managed to get a very low price. Do you really think that is a good deal you got? Chances are the factory will cut corners to ensure they are able to get some profit out of the deal. That means that you will not be getting the quality you were hoping for. What happens if the product you receive does not meet the safety requirements in your country? That is a giant waste of investment.
Simply assuming that your manufacturer understands you could be a mistake, one that could prove very costly. The sales representative of the Chinese factory may speak English, but you need to remember that it is their second language. If they are not sure of your request, they may not raise a question directly for fear of looking unprofessional or worse, losing your order. When specifications are not clear, it is obvious that your product will not be manufactured according to your expectations.
Besides product specifications, you may have other requirements, such as specific raw materials or a certain level of quality. If your manufacturer does not get them right, you lose a lot of time and money.
Due to cultural variations and a language barrier, your demands may be misunderstood. This could lead to misunderstandings, which could cost you money during any China sourcing process. Ensure that all specs are written down and reviewed with your supplier. Also, you should encourage children to ask questions when they are unsure and seek clarification when necessary.
Assuming the wrong shipping costs is yet another mistake that many importers make. Airfreight is definitely costlier than sea freight. However, just because your products are being shipped by sea does not mean you will pay a substantially low price. In most cases, when you ship by sea, you pay for the container, and if your container is entirely packed, you may end up saving costs. However, if your product quantity is less, you will still need to pay for the entire container. Plus, you should not forget to factor in the customs fees.
Yet another shipping mistake that many importers make is incorrect paperwork that could end up delaying your shipment. The shipping of products could be delayed for several reasons, such as the pandemic or natural calamities. That’s not in our control. However, the right paperwork is. An incorrect customs declaration or other paperwork can be one of the reasons why shipments get delayed. A simple error such as wrong product description could cause your cargo to get stuck in customs clearance.
When you obtain a quote from any Chinese supplier, you may start feeling like you have achieved your goal, imagining the profits that you will make. However, there could be some hidden charges that you are overlooking when calculating the price of your goods.
When forecasting your cost, you must include the overall landed cost, not just the unit cost and sea shipping cost that is quoted. This will offer you a better idea of how much finally you will have to pay your Chinese provider in the end.
1. Use a trustworthy sourcing agent
A reliable and trustworthy sourcing agent may take care of your entire sourcing process in China. The agent can get quotes from certain reliable manufacturers, monitoring production, and take care of shipping, ensure pricing, quality, and delivery of your products.
So, you must select an experienced agent who has an office in China, with a bilingual team who has experience in production, quality control, and shipping. Your agent must be well-versed with Chinese business culture and also be aware of the product that you are planning to purchase from China.
You can have the following expectations from a certain reliable sourcing company in China:
- Good knowledge and information about manufacturing hubs in China.
- Well-versed in English and local languages and also excellent communication skills.
- Excellent coordination skills.
- Awareness of various compliance regulations.
2. Verify the agent’s credentials
Don’t choose the very first name that you get after doing a Google search. Rather take some time in doing research about the agent to verify his track record and credentials. Check the following about the agent:
- Where is your agent located?
Prefer a certain agent located in China as it is impossible to get full details about any local suppliers.
- How long has the agent’s Chinese office been working?
Verify how long the agent is involved in this business.
- Can the agent provide references?
Ask for references and speak to those references in detail about the agent.
- How are quality concerns handled by the agent?
You must tell them that you will not accept any substandard product.
- Whether the agent speaks good English?
Ensure that the agent and his staff are proficient in speaking and writing good English.
3. Have clarity about what you want
You must submit a comprehensive specification of the products or materials that you want from your manufacturers for your sourcing process to succeed. Make it crystal clear what you are looking for in a product or any raw material. Don't take anything for granted because doing any business in China differs significantly from doing business in your country.
Failure to offer explicit instructions may cause confusion, and you may receive something other than what you ordered. You will waste a lot of your time and money trying to find the correct things.
If possible, include comprehensive drawings. You may wish to send your supplier a sample piece if you are actively manufacturing your products. If you have to make adjustment, make sure that you provide precise written instructions.
4. Insist on excellent quality samples before placing your order
Despite providing thorough instructions, there is still the possibility that the things you receive will not meet your expectations. As a result, before placing a purchase order, always request a sample which fully satisfies you. Although the first round of samples might not meet your requirements. Your suggestions will assist the manufacturer in making improvements to the product, so you have chance to receive the next round of samples. Do not order until you are fully satisfied with the samples. Take time to thoroughly test the samples you receive from the manufacturer. Your products must fulfil all of your clients' needs.
You must also provide an estimated number of items you will require. If you appear to be a vital business source, the manufacturer is more inclined to pay attention. They may not be as receptive if they believe you would only place a small order.
5. Take control of the quality aspects
Taking control of quality is the safest approach to source any products from China. If you are unable to pay a visit to the factory yourself, hiring an independent 3rd-party quality inspector is a smart option. Your sourcing agent also can assist you in locating a reputable quality inspector in his team. It will be critical that your quality inspector provide you with an independent view of the products' quality.
You and your agent should have a suitable quality management plan in place. Also, you may need to visit China's factories on a regular basis to confirm that the entire quality control plan that you set is working properly.
6. Understand your quality controls
Understanding the following will be helpful for you as a customer:
Vetting process: Ensure that your sourcing agent checks the license, experience, track record, and certifications of suppliers and also, he made enough efforts.
Factory visits: Your sourcing agent must pay a few visits to the factories before recommending you any manufacturer. He must check their production methods and quality systems.
Quality certificates: Your representative must verify that the manufacturers with whom they work have legitimate quality certificates. These certificates are not held by all Chinese firms.
7. Be realistic about the pricing
Indeed, the low-price rates available in China are not available anywhere else in the world. You must, however, keep in mind that you receive what you pay for.
Chinese manufacturers can deliver affordable goods due to low labour costs and technological improvements. However, it is recommended to stay away from the cheapest items. Manufacturers may scrimp on quality to supply you with low-cost goods.
In addition, China's manufacturing industry is flourishing. Every day, new factories emerge. Newcomers may agree to produce your goods at rock-bottom prices, but they will inevitably compromise on quality.
The goods produced by established firms will be of considerably greater quality, but this quality will come at a higher cost. You should consider pricing when developing a strategy for sourcing from China, however, this is not the only thing to consider. You must deliver high-quality products if you want your firm to flourish and your number of loyal clients to increase. You should only work with vendors who offer competitive products without sacrificing quality. Yes, they are a little more expensive, but they are worth it.
Conclusion
When you source from China, you are basically carrying out an international transaction. Like any other transaction, it carries its fair share of financial and legal risks. Reliable sourcing agents can ensure that the entire sourcing process from China goes off without a hitch. Your sourcing agent can help you develop a robust sourcing strategy, vet manufacturers, evaluate samples, handle negotiations, work on paperwork, and so much more. Eventually, you may find that importing from China can be extremely profitable if you avoid all the costly mistakes.
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